There's a saying that one should ''invest in what you know.''Carl Kuntz, 46, does that with a vengeance. The Taber, Alta. field supervisor for the oil and gas industry has 90 to 95 per cent of his portfolio in oil and gas stocks. He'll often be playing some 50 stocks, and keeping on watch on 150.
"I know a lot of people, see a lot of things, and hear a lot of word of mouth," he says.
How he does it
A big part of his information network is colleagues in the oil and gas servicing industry, companies hired to do everything from service machinery to drilling. "If someone says 'George just completed a well for so-and-so,' I'll hear about it."
But that doesn't mean an instant buy order. In fact, Mr. Kuntz often hears so early that there's little if any volume in the stock. It's only when he starts to see the volume pick up along with the price that he'll consider buying.
"There are lots of undervalued oil and gas companies, because after the last crash everybody has shied away from the sector."
He notes that even if the price of oil falls again from more than $32 (U.S.) a barrel at present, he figures that at anything over $18 a barrel, a lot of companies can make a good deal of money, and it's only a matter of time before investors flood back into the sector.
"I think when second-quarter results come in the sector will really start to run."
While he's watching a stock, he'll try to get a handle on what sort of shape the company is in. Given that he focuses on small-capitalization stocks, the best debt situation is no debt at all.
He has also discovered that there are a number of small-cap stocks that bounce up and down in a fairly defined range.
For example, in the fall of 2001, he heard about Kensington Resources Ltd. (KRT-TSX-VEN), a junior exploration company that was looking for diamonds in Saskatchewan as a partner along with DeBeers, Cameco, and UEM in the Fort à la Corne Diamond Project. The next morning, he bought in at 40 cents (Canadian) a share, and shortly after, when the stock hit 80 cents, he sold half his position.
He held onto it, and then this past spring, the stock started to swing, and he played it, regularly buying 10,000 shares at between 70 cents and 75 cents, and selling at 80 cents.
"At one point, the way the swings were going, I was making $400 to $900 every week," he says. "A lot of stocks will cycle like that, and not too many people play 6- to 10-cent swings."
Shore Gold Inc. (SGF-TSX-VEN) is a typical play for Mr. Kuntz. In 2001, he was on the road when he heard about the company, which despite its name is also exploring for diamonds in the Fort à la Corne region.
When he returned home, he put in an order the next morning, which was filled at 60 cents. The stock soon jumped to $1.20, at which point he sold half his shares. "A lot of time if a stock doubles I'll sell half. If it goes up more, great, if not, I haven't lost anything."
Shore Gold also turned out to be a good swing trader, with Mr. Kuntz regularly buying in the low 70-cent range and selling at 80 cents.
He doesn't use stop orders, instead putting in open buy and sell orders at the prices he figures the stock will cycle between. For instance, as soon as a buy order is filled, he'll immediately put in a sell order.
One of his longer-term picks is Tesco Corp. (TEO-TSX.) Based in Calgary, Tesco makes and services oil field drilling equipment. He first bought it in the early 1990s at $2.40. Since then, he's played it as it bounced between $12 and $17, trading 1,000 shares a time. This last spring, for instance, he bought and sold in four times in just one month.
Mr. Kuntz has great hopes for Tesco because of its research and development efforts.
When drilling an oil well, a great deal of time is used up by having to regularly lift the drill pipe out to replace the bit.
Tesco has come up with a way to leave the casing in place, and change drill bits and other tools by lowering them down inside the casing.
This casing drilling saves exploration companies money and time, the company says, thanks to lower energy usage, reduced manpower needs and added safety.
"I think it's really undervalued at [$12.40]and by the end of the year it will be at least $25," he says. Tesco is now trading at about $12.33on the Toronto Stock Exchange.
Mr. Kuntz keeps track of the 150 or so stocks he owns or follows using the portfolio feature offered by the Yahoo finance Web site, and enters in new stock prices each evening.
Best move
In 1998, he put a little money into a junior called Dancap, which was trying to boost production from a small oil well it had in southwest Saskatchewan.
He picked up some shares at 15 cents each, and later got into a private placement at 30 cents. He sold some at 80 cents, saw the stock fall back to 60 cents, bought more shares, and then got 80 cents for all his outstanding shares when the company was taken over by Storm Energy.
Worst move
In the tech heyday, Mr. Kuntz got involved in a couple of private placements for Web sites. But development ate up too much cash, the market bubble burst, and new Web sites became just about as popular as yesterday's doughnuts.
"I got hold of all the information I could, but I didn't know the people, and I usually like to really get to know the management."
Advice
"Find out as much as you can about a company, and ask all the questions you can."
The investor
Carl Kuntz
Age
46
Occupation
Field supervisor in oil and gas industry.
Investment personality
Aggressive
Portfolio
Stocks traded include: Erin Ventures, Kensington Resources, Tesco Corp., Forbes Medi-Tech.
Portfolio size
'Six figures'
Rate of return
'Over 10 per cent a year for the past four years.'